Yesterday I had the opportunity to attend a business meeting with several of transportation economists. There were many disagreements on smaller points but we were all agreed on one thing:
The trucking industry is a leading indicator for the general economy.
The good news is that freight volumes seem to be increasing and as the main manufacturers of class VIII trucks seem to be making more trucks, EPA compliant engines are becoming more affordable to the general public.
For lenders and lessors like myself, this is a double-edged sword. This means that the equipment that we are currently financing is losing value at a faster rate than originally predicted. However, this also means that there is work available for our customers to keep utilizing their equipment and will facilitate better loan-to-value ratios on the newer transactions.
As people become more confident in their new lifestyle patterns, they're tending to return to a comfortable level of spending. The average American public is still not splurging like they were several years ago but they are taking the time to spend a few extra dollars on some limited luxury items. This in conjunction with the population growth ensures that freight volume will continue to increase, at least when measured at a macro level over an extended period of time.
For those who would say that the trend towards miniaturization might thwart this. I would say that it already has and now we are recovering from it. I call it the laundry soap affect look at the size of the boxes for your laundry soap. They've gotten smaller over the past few years but it maintain their size within the past 12 months. This indicates that miniaturization, at least in the short term, has already had its impact.
The one cog in the wheel, for us truck people, is the railroad.
As the railroad companies are expanding the infrastructure in order to reduce bottlenecks, they're also investing multiple billions of dollars at our nation's ports with the end goal of transferring containers directly from the ships to the trains.
Some would be concerned by this, but I'm not sold on the fact that this is a negative trend. Think about it. How are people going to get merchandise from distribution centers to their stores?
This may crimp the style for long-haul truckers but I am pretty sure that it will increase the demand on regional deliveries. This will especially be true as the railroads decrease their delivery windows.
All in all, things are looking up for the trucking industry, which is a sure indicator that unsuspecting banks will be jumping in to the truck finance market and I hope they know what they're getting into. (http://truckfinanceaisi.blogspot.com/2011/08/do-you-really-know-what-youre-getting.html)
Trucking is a very specialized market but like all specialized markets, we tend to be on the leading edge.
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